$250m loan to buy vessel

Dubai-based Bakkah Shipping Co is seeking a $250 million loan from IDB to buy vessels after its initial business failed to make much headway in the global economic storm.

Dubai-based Bakkah Shipping Co is seeking a $250 million loan from IDB to buy vessels after its initial business failed to make much headway in the global economic storm.

Dubai-based Bakkah Shipping Co is seeking a $250 million loan from the Jeddah's Islamic Development Bank (IDB) to buy vessels after its initial business failed to make much headway in the global economic storm, its chairman said. ?The IDB is considering our request for a $250 million loan. The rest will be financed by other banks,? Mohammad Souri, also National Iranian Tanker Co (NITC) chairman told.

Souri declined to say exactly how many vessels or what types it plans to buy, but said the initial order could be for around 10 ships.

Bakkah, set up in 2007 to promote sea links between Muslim countries, has been operating with just one chartered tanker since it began operations.

The company was set up with a capital of $30 million and participation from 11 maritime firms from Islamic countries.

Asked why it has taken the company so long to even start building a fleet, Souri said deterioration in the global economy had upset the initial business plan.

?We were reluctant to take risks,? he said.

Souri said the company"s orders could total around $750 million when it takes its business of tanker and bulk cargo to a sizeable level.

Shipping has been one of the worst-hit sectors in the global recession, with the drop in international trade hitting demand for sea transport.

Freight rates are significantly down from their peak of last year, forcing shipper to leave vessels idle.

Souri said Bakkah will likely to benefit from cheap ship prices as material costs have fallen.

A tanker that cost $70 million last year is now available for just $30 million. A very large crude carrier (VLCC) can now be built for $100 million for delivery in 2012 compared with the price tag of $156 million in early 2008.